Varun Beverages shares rise after three sessions; market cap tops Rs 1.03 lakh crore mark

Shares of Varun Beverages Ltd gained after three days of consecutive fall amid a correction in the broader market today. Varun Beverages stock gained 2.84% intraday to Rs 1627.3 against the previous close of Rs 1582.35 on BSE. In a year, the stock has rallied 116% and gained 21% in 2023. A total of 0.63 lakh shares of the firm changed hands, amounting to a turnover of Rs 10.13 crore on BSE.  Market cap of the firm rose to Rs 1.03 lakh crore.

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 47.8, signaling the stock is neither oversold nor oversold. The stock has a one-year beta of 0.8, indicating low volatility during the period. Varun Beverages shares are trading higher than the 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.

Axis Securities is bullish on the stock with a target of Rs 1860.

“Varun Beverages is consistently outperforming its peers in the last several quarters despite volatile environment . Going ahead, Varun Beverages is expected to perform well on account of - 1) Normalcy of operation and market share gains of newly acquired territories post COVID-19 disruptions 2) The management’s continued focus on the efficient go-to-market execution in acquired and underpenetrated territories as reflected in its recently commissioned Bihar plant operations (it has started gaining market share), 3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 Mn currently, 4) Focus on expanding high-margin Sting energy drink across outlets coupled with increased focus on expansion of ValueAdded Dairy, sports drink (Gatorade), and Juice segment, and 5) Robust growth in the International geographies,” the brokerage said.

In a key development, the franchisee of PepsiCo fixed June 15, 2023 as the ‘Record Date’ for determining entitlement of equity shareholders for the purpose of sub-division / split of existing equity shares. On May 2, board of Varun Beverages decided to split its shares in the proportion of 1:2. For every existing share an investor holds, two additional shares will be issued by the company.

Varun Beverages said the split was being done to enhance the liquidity of the company's shares and to encourage the participation of small investors. 

The stock split is likely to be completed in two months from the date of approval of the company's shareholders. Record date for the stock split will be determined once approval of shareholders is obtained. 

Earnings performance  

Varun Beverages reported a strong set of earnings for the quarter ended March 2023. The company follows the January-December format for results. Net profit in Q1 climbed 69 percent year-on-year to Rs 429 crore. Operating profit or EBITDA climbed 50 percent to Rs 798.1 crore. 

EBITDA margin in the March quarter rose 170 basis points year-on-year to 20.5 percent.

Revenue rose 38 percent to Rs 3,893 crore on a year in year basis. Revenue growth was led by robust volume growth and an increase in net realisations. Sales volumes climbed 24.7 percent to 224.1 million cases, led by strong demand across India. Realisations in Q1 climbed 10.4 percent year-on-year to Rs 173.7 per case due to price hikes and improvement in energy drink mix of smaller SKUs. 

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